Bill Hampel, senior vice president and chief economist at CUNA, told Congress on Tuesday that his trade group supports the Corker-Warner bill’s general approach to housing finance reform but he suggested several areas in need of improvement.
“CUNA believes the general approach to housing finance reform embodied in S.1217 to be very well thought out and sound public policy,” Hampel told the Senate Committee on Banking, Housing and Urban Affairs during a hearing on housing finance reform and protecting small lender access to the secondary mortgage market.
“S. 1217 corrects the fatal design flaws of the previous system, while maintaining the effective aspects of that system to create a structure designed to serve borrowers and lenders of all sizes well, preserving a backup government guarantee with sufficient protections that risk to the taxpayer is reduced to nearly zero,” the CUNA economist added in his written testimony.
The Housing Finance Reform and Taxpayer Protection Act of 2013 would phase out Fannie Mae and Freddie Mac. It would also replace the Federal Housing Finance Agency with the Federal Mortgage Insurance Corporation, which would provide insurance on certain mortgage backed securities and regulate the secondary mortgage market.
In addition, the bill would create a mutual securitization company to help small lenders access the secondary market.
Hampel suggested some improvements to the bill specific to credit unions.
“We believe that credit unions may need additional investment authority in order to capitalize their share of the mutual envisioned by S. 1217, and we encourage the Committee to provide that authority,” he said.
“We encourage the committee to include language that would amend the Federal Credit Union Act to consider loans made on 1-4 family residential properties as residential loans as is currently the case for commercial banks,” Hampel told the Senate panel.
In addition, Hampel encouraged the senators to support a delay of the compliance deadlines for the Consumer Financial Protection Bureau’s new mortgage rules.
“Largely due to concerns with vendor readiness – a one-year extension of January’s compliance deadlines for CFPB’s new mortgage rules would be optimal,” he said.
Hampel also said the secondary market needs strong oversight.
“We envision a regulator in the mold of the NCUA or the Federal Deposit Insurance Corporation, with direct examination and supervisory authority, given that the full faith and credit of the United States stands behind FMIC insurance, as it does with NCUA or FDIC insurance,” said his written testimony.
“The entities providing secondary market services must be subject to appropriate supervisory oversight to ensure safety and soundness, for example by ensuring accountability, effective corporate governance and preventing future fraud. They should also be subjected to strong capital requirements and have flexibility to operate well and develop new programs in response to marketplace demands,” he added.
John Harwell, associate vice president of risk management at the $1.8 billion Apple FCU in Fairfax, Va. testified at the hearing on behalf of NAFCU.
Both Harwell and Hampel told the committee they support the creation of a mutual. Hampel recommended that the bill not place a cap on membership in the mutual.
“S. 1217 would cap membership in the mutual to institutions with less than $15 billion in assets. We believe that this cap is far too low, and would suggest that lenders of almost any size should be able to use the mutual, so long as they do not themselves issue covered securities,” he said in his written testimony.
“Restricting the mutual to serving just smaller lenders would preclude achieving necessary scale economies. Indeed, it would be desirable for the mutual to be among the largest if not the largest issuer of covered securities,” he added.